All posts for the month October, 2004

The Best Analysts: International Bets

WASHINGTON, D.C. – If you’re looking to invest outside the U.S., here’s one way to go about it. Start with international stocks listed on U.S. exchanges. Then tap into the expertise of Wall Street’s most accurate analysts.

The first part of the equation is easy enough. You can buy shares of foreign corporations traded on U.S. exchanges via American Depositary Receipts, which are certificates issued by U.S. banks acting as the depositary for shares in the non-U.S. companies. Although ADRs don’t eliminate currency risk, these securities are as easy to trade as shares of U.S.-headquartered companies. Dividends from some issues may be subjected to a foreign withholding tax, but U.S. investors receive net distributions in American currency.

And the accurate analysts? For that we turn once again to our friends at San Francisco’s StarMine. Since 1998, the firm has specialized in identifying brokerage analysts with track records for correctly forecasting profits. The technique enables StarMine to create a “SmartEstimate,” or an estimate that is weighted to timely calls from accurate analysts.

Full story at Forbes.com

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De-Sprawling The Highway Bill

WASHINGTON, D.C. – Among the big-ticket items it didn’t get around to this fall, Congress failed to finish work on a six-year transportation spending package. Even a $299 billion compromise between House and Senate versions, 37% bigger than the 1998 highway bill and reportedly backed by the White House, fell short of coming to a vote.

Good riddance, according to Don Chen, executive director of the anti-sprawl group Smart Growth America. “We prefer extension of the debate to passage of a bad bill,” he says. “We’re still looking to see a bill that actually carries out the wishes of the American people.”

For Chen and colleagues, those wishes are embodied in the goals of the “smart growth” movement: to reduce traffic, preserve open space and develop communities where people can get to work and leisure without their cars. In policy terms, that means favoring repair of existing roads over new construction, creating incentives for transit-oriented real estate development, and more funding for mass transit and programs to encourage walking and biking.

This is no easy agenda to push at the federal level, especially given legislators’ historic fondness for laying pavement. But as far as the highway bill goes, smart growth proponents at least have some time to press their case. Two weeks ago, President George W. Bush extended existing transportation spending laws through the end of next May.

Full story at Forbes.com

Plucking Flowers From the Wall

John Keeley, manager of the $170 million Keeley Small Cap Value Fund, likes being a value guy: “You probably make fewer mistakes than you do in the growth area,” he muses. “There are fewer moving parts.”

Here’s how Keeley, 64, keeps it simple. First, he largely ignores technology and health care stocks. Second, he limits his buying to five kinds of companies: those coming out of bankruptcy, those looking very cheap relative to book value (excess of assets over liabilities), spunoff subsidiaries, utilities, and converted thrifts and mutual insurance companies. These days Keeley’s fund, a Forbes Honor Roll member (see Sept. 20) holds 114 stocks. Not quite half fall into the spinoff category.

It has been a winning formula for Chicagoan Keeley. The University of Chicago business school graduate began his career in 1966 as a financial analyst in the pension department of Standard Oil of Indiana (now part of BP). After three more jobs in the investment business, he founded Keeley Investment Corp. in 1977. Keeley Asset Management, started five years later, now manages $1.2 billion. The Keeley Small Cap Fund has returned 14% annualized since its launch in October 1993, versus 10% for the S&P 500.

Full story at Forbes.com